Does every lawyer drown in debt? Forum

[criminologygeek]

Does every lawyer have to drown in debt? I know grad school is obviously expensive and there's just no way around it...but I would absolutely hate to be 40 still paying off my debt. That just sounds miserable, and from what I've been reading on here, it's a real issue. How much do scholarships cover if you're able to get one?

Also, I have a full ride right now at my university so I'm basically attending for free, so the reason why I'm concerned is because it would be a big slam in the face to finally finish Uni and be slammed with a 6 figure debt.

[Npret]

Harvard is 365,295 for people starting this year. When you will theoretically start, it will be significantly more expensive.

No, not everyone drowns in debt. But without family support, personal savings or military benefits, even with scholarships or need based aid, people can end up in 6 figures of debt.

[nixy]

Yeah, there are a number of full-tuition scholarships out there, but very very very few actually provide a stipend for living expenses on top of tuition, so in the absence of family funding etc, you'll need to anticipate taking loans for three years of living expenses (which are obviously going to be cheaper for, say, Ann Arbor than for NYC).

If you look up ABA 509 forms for the schools you're interested in, they include info on things like what percentage of students get aid and what percentage of the cost they get in aid. Keep in mind that students listed in that as having over 100% aid may be dual-enrolled and getting aid from the non-law department (people doing a JD/PhD are usually in this situation), so it may not reflect the resources available to you.

You can also google student loan repayment calculators that will tell you how much you'd be paying back per month based on X amount of debt.

[objctnyrhnr]

OP, don’t know how much research you’ve done into outcomes and exit options here, but the pertinent detail is this: biglaw gets a lot of flack anecdotally, but the reality is that a huge percentage of people who can get it do it. The reason is that it’s by far the biggest category of post law school job that can service significant debt, while not forcing a graduate to complete sacrifice quality of life. That’s why there exists an overwhelming sentiment that if you aren’t getting floated financially through law school (savings, parents, significant other, merit aid), you should only really go to a school that gives you a good shot at biglaw.

So correspondingly, if you play your cards right, you end up in biglaw for enough years to pay off your debt. Then you leave if you hate it for something you like, or stay for a bit to get a nest egg, or whatever.

[nixy]

If your goal is PI work, the calculus can be slightly different, though.

(Also some people would argue biglaw does require you to completely sacrifice quality of life, although obviously circumstances vary.)

[objctnyrhnr]

If your goal is PI work, the calculus can be slightly different, though.

(Also some people would argue biglaw does require you to completely sacrifice quality of life, although obviously circumstances vary.)

Agreed on both accounts. Sorry if my point was incomplete, insofar as it only focused on biglaw or lack thereof in relation to debt-related considerations.

[nixy]

If your goal is PI work, the calculus can be slightly different, though.

(Also some people would argue biglaw does require you to completely sacrifice quality of life, although obviously circumstances vary.)

Agreed on both accounts. Sorry if my point was incomplete, insofar as it only focused on biglaw or lack thereof in relation to debt-related considerations.

No, no, it was a good point.

[QContinuum]

Harvard is 365,295 for people starting this year. When you will theoretically start, it will be significantly more expensive.

No, not everyone drowns in debt. But without family support, personal savings or military benefits, even with scholarships or need based aid, people can end up in 6 figures of debt.

The jaw-dropping expense of attending law school - any law school - at sticker is why TLS consistently advises 0Ls to retake the LSAT until they can attend a school appropriate for their goals at a decent cost. Often this means attending a school that's ranked a few spots below the highest-ranked school one gets into, when the lower-ranked school is significantly cheaper to attend.

This often crops up here in the context of students who get into Harvard, but who also receive a large or even full-tuition scholarship at a "lower" T13. Almost always it makes more sense to attend the "lower" T13 on the cheap than to attend Harvard at sticker.

Taking out huge loans to attend a T13 at sticker is doable, of course. T13 students will either get BigLaw, which will allow them to service their debt, or pursue PI, which will allow them to rely on PSLF and their law school's LRAP. But it's still painful, and it absolutely still makes sense to minimize debt.

[nealric]

Does Every lawyer drown in debt, no. But, setting aside those with "family money", avoiding that fate requires careful planning, aptitude in the profession, a lot of work, and a decent bit of luck. I'd say young lawyers without significant debt are the exception, not the rule.

Personal anecdote:

I borrowed 2/3 of total tuition when I attended law school (graduated about 9 years ago) at an expensive school. I worked part-time and had some savings, plus was a biglaw summer associate 2L summer, which meant I never borrowed for living costs. My loans were paid off 5 years post-graduation after 3 years of biglaw and 2 years in-house. Since then, I've accumulated a positive net worth that is a significant multiple of what my maximum debt was.

A few notes:

I lived a very cheapskate existence in law school. I rented a room in a group house rather than having my own place and ate lots of canned beans and tortillas. I also cut costs quite a bit post-grad by living in a relatively cheap place in a still-developing part of the city. When I went in-house, I moved to a cheaper COL city, but also bought a house at the same time. I had a spouse in a similar situation who started law school after I graduated, and who also borrowed about 2/3 tuition (no living expenses), and also did biglaw.

Thoughts on application to a potential student:

Given significant tuition increases since I started, it would likely take an extra year to do the same, although biglaw salary increases mitigate that somewhat. I'd also call my situation a best-case scenario for debt repayment absent a unicorn situation like working for WLRK in a 100% bonus year or getting rich after joining a startup. This is by no means a certain outcome, even if you attend YLS- you can end up in the wrong place at the wrong time and get shut out of remunerative employment. It is not an outcome you should anticipate if you go to a school with less than 50% biglaw placement. If you borrow significant amounts, short of biglaw, you are mostly looking at PSLF (which has proven to be a very problematic program), or a lot of years of scrimping.

[The Lsat Airbender]

If you borrow significant amounts, short of biglaw, you are mostly looking at PSLF (which has proven to be a very problematic program), or a lot of years of scrimping.

Worth noting that HYSColumbia's LRAP programs allow for negative-amortization (so you don't have to worry about PSLF being fucky, or about the tax bomb" when it pays out), so there's a bit more security there. Some other top schools implicitly promise that they'll take care of people if something happens with PSLF and have the financial resources to back that up (I'm thinking of Chicago/NYU but this is probably true of several others in the T14). Yale in particular has an amazing program, which is a big part of the reason why it's not a bad choice at sticker.

It's still crappy to have that much debt, though, and you still have to make a lot of payments/deal with tax implications, which often screws people who thought "loan forgiveness = free law school".

[nealric]

If you borrow significant amounts, short of biglaw, you are mostly looking at PSLF (which has proven to be a very problematic program), or a lot of years of scrimping.

Worth noting that HYSColumbia's LRAP programs allow for negative-amortization (so you don't have to worry about PSLF being fucky, or about the tax bomb" when it pays out), so there's a bit more security there. Some other top schools implicitly promise that they'll take care of people if something happens with PSLF and have the financial resources to back that up (I'm thinking of Chicago/NYU but this is probably true of several others in the T14). Yale in particular has an amazing program, which is a big part of the reason why it's not a bad choice at sticker.

It's still crappy to have that much debt, though, and you still have to make a lot of payments/deal with tax implications, which often screws people who thought "loan forgiveness = free law school".

Yes, the most elite schools do have programs, which is why I said "mostly." I'm sure there will also be a few personal injury folks who strike it big and the like.

[Yugihoe]

If you get a full ride to a t14 and have enough savings/family support for two years, you can snag a biglaw job for 2L summer and use that 30k to help defray some of your other costs for 3L. Then, you too, can graduate without debt. Also make sure you live frugally during those first two years (though you should probably be living frugally in perpetuity anyway).

[cavalier1138]

Worth noting that HYSColumbia's LRAP programs allow for negative-amortization (so you don't have to worry about PSLF being fucky, or about the tax bomb" when it pays out), so there's a bit more security there. Some other top schools implicitly promise that they'll take care of people if something happens with PSLF and have the financial resources to back that up (I'm thinking of Chicago/NYU but this is probably true of several others in the T14). Yale in particular has an amazing program, which is a big part of the reason why it's not a bad choice at sticker.

Just a quick addendum to this:

NYU also covers negative amortization if you switch out of the PSLF-based repayment plan. Not sure if another T13 does.

And as far as I know, these programs do not contemplate the possibility of the tax bomb, because you shouldn't get hit with one if you're on LRAP and/or PSLF. The tax bomb only applies to people who are on PAYE/REPAYE for 25 (I believe it's still 25) years and have their outstanding balance forgiven. If they're financially solvent, they have to pay tax on the amount forgiven. But if you qualify for PSLF, forgiveness happens at 10 years, and there's no tax penalty. If you're on a non-PSLF LRAP, there's no loan forgiveness; the school helps you pay off the entire loan, usually on a ten-year plan.

[QContinuum]

A few thoughts on loan forgiveness programs:

• These don't apply to well-paying (i.e., BigLaw) gigs, so you're on the hook for the entire amount you borrow (plus interest) if you go into the private sector. That's a lot of money. And keep in mind, you make loan repayments out of post-tax money. When you make a $190k salary, you aren't taking home $190k. If you're in New York, something like 40% of that will go to paying federal, state, and city taxes (I'm talking income taxes plus payroll taxes plus property taxes). You're really making only a bit more than $100k, and you still need to pay for housing and food and transportation and 401(k) savings and saving up for a down payment/wedding/emergency fund/etc. It's easy to get suckered into the trap of "I'll make $190k! I can live on $90k and plow $100k into debt repayment!" Nope.
• Federal government loan forgiveness programs - PAYE/REPAYE and PSLF - are separate and distinct from law school loan repayment assistance programs (LRAPs; some schools use different acronyms, Yale calls its LRAP "COAP" and Harvard calls its LRAP "LIPP" for instance). Typically those with qualifying employment will combine a federal loan forgiveness program with their law school's LRAP.
• Any loan amount forgiven under PAYE/REPAYE is considered taxable income (just as with any other kind of forgiven debt, whether it's forgiven credit card debt or a forgiven mortgage or whatever). There is an exception specifically for PSLF where any loan amounts forgiven under PSLF are not taxed. This is significant, because if you have, say, $200k in loans forgiven under PAYE/REPAYE, you'd suddenly be taxed as if you'd earned an extra $200k (on top of your salary) that year. It's a big chunk of change - many tens of thousands of dollars.
• PAYE/REPAYE/PSLF, especially combined with a law school LRAP, make it possible for a graduate with massive student debt to pursue public interest/government service which would otherwise be financially untenable for them to pursue. But it's not a comfy ride by any means. Even in the best case scenario - with a PSLF-qualifying job where the loans will be forgiven in 10 years with no tax bomb at the end - the graduate must 1) remain in PSLF-eligible employment for 10 years, and 2) possibly defer marriage for 10 years, because getting married may significantly increase the graduate's monthly repayment amounts. Most graduates aren't willing to wait until they're ~35 (in the typical K-JD scenario) to get married, and there's some element of risk in betting on 10 years of PSLF-eligible employment. So public interest grads typically end up repaying significantly more than initially anticipated under the best case scenario.

[albanach]

A few thoughts on loan forgiveness programs:

• PAYE/REPAYE/PSLF, especially combined with a law school LRAP, make it possible for a graduate with massive student debt to pursue public interest/government service which would otherwise be financially untenable for them to pursue. But it's not a comfy ride by any means. Even in the best case scenario - with a PSLF-qualifying job where the loans will be forgiven in 10 years with no tax bomb at the end - the graduate must 1) remain in PSLF-eligible employment for 10 years, and 2) possibly defer marriage for 10 years, because getting married may significantly increase the graduate's monthly repayment amounts. Most graduates aren't willing to wait until they're ~35 (in the typical K-JD scenario) to get married, and there's some element of risk in betting on 10 years of PSLF-eligible employment. So public interest grads typically end up repaying significantly more than initially anticipated under the best case scenario.

Also, even if you get married and are making good money, say a combined income of $200k with a couple of kids. If you attend at sticker, your PSLF repayments still won't cover interest. So, should you fall out the program, you'll have a massive debt to deal with. If you make less, something more like $120, then your debt will be growing very substantially.

One of the problems with PSLF is that you can't take advantage of private sector options to refinance into a lower interest rate and government rates are way above market.

[The Lsat Airbender]

Yeah - once you're a couple years down the PSLF path, positive amortization means you're basically a public debt slave until you're too old to change careers. That's fine if you really love the work you're doing but I doubt most 22-year-olds properly contemplate the stakes when they take on six-figure debt.

[nixy]

and 2) possibly defer marriage for 10 years, because getting married may significantly increase the graduate's monthly repayment amounts. [/list]

I mean, it's true that getting married increases your monthly repayment amounts because your spouse's income counts. But you also have your spouse's income, and your payment is still capped per PAYE/REPAYE. So while it's more than you'd pay if you were single, it's not going to beggar you. There is also the option under PAYE to file separately and only have your own income count (not sure in the long run if the tax implications are worth it, but it's an option).

I also don't think 10 years in public service means you can't change jobs - it depends a lot on what you actually do. Careers are long and can go in directions you don't anticipate. You're not likely to move into biglaw after 10 years in public service, but there are lots of other kinds of paths.

[criminologygeek]

Harvard is 365,295 for people starting this year. When you will theoretically start, it will be significantly more expensive.

No, not everyone drowns in debt. But without family support, personal savings or military benefits, even with scholarships or need based aid, people can end up in 6 figures of debt.

Sounds like a precise number, does that include housing, food, etc? I imagine it'll accumlate to half a million by the time i'd even apply. Sounds like a dreadful loan; i'd hate asking my family to cover even a quarter of that amount. I suppose i'd just save up.

[criminologygeek]

OP, don’t know how much research you’ve done into outcomes and exit options here, but the pertinent detail is this: biglaw gets a lot of flack anecdotally, but the reality is that a huge percentage of people who can get it do it. The reason is that it’s by far the biggest category of post law school job that can service significant debt, while not forcing a graduate to complete sacrifice quality of life. That’s why there exists an overwhelming sentiment that if you aren’t getting floated financially through law school (savings, parents, significant other, merit aid), you should only really go to a school that gives you a good shot at biglaw.

So correspondingly, if you play your cards right, you end up in biglaw for enough years to pay off your debt. Then you leave if you hate it for something you like, or stay for a bit to get a nest egg, or whatever.

Yes, but I think biglaw is highly competitive and the likelihood of landing a spot after law school is fluke. Taking into account YLS might have a graduating class of say, 200 students. That's just one of T1-T5 that have an upper hand among other applicants applying to biglaw. I'm not saying every one of those '200' students want a chance at biglaw (since most biglaw jobs include writing memos instead of litigating cases,though this can be argued otherwise.) Law school is already grueling since everyone wants to be at the top of their class. Even a YLS graduate who would much rather litigiate cases versus writing docs all day can easily choose biglaw to prosper and pay off their stacked up loans.

My point is, biglaw is somewhat difficult to get into since the amount of job openings available decrease after an overwhelming amount of TLS students apply in hopes to pay off their debt. Though, I don't disagree with you that the likelihood of landing a shot at biglaw is increased through getting into a good school

[cavalier1138]

Taking into account YLS might have a graduating class of say, 200 students. That's just one of T1-T5 that have an upper hand among other applicants applying to biglaw.

Don't look at Yale's numbers for biglaw. Most Yale grads are going to be in much more competitive positions right out of school (clerkships, etc.).

My point is, biglaw is somewhat difficult to get into since the amount of job openings available decrease after an overwhelming amount of TLS students apply in hopes to pay off their debt. Though, I don't disagree with you that the likelihood of landing a shot at biglaw is increased through getting into a good school

Look at the other T13 job numbers. Most of them place at least 70% of the class in biglaw. It's definitely not a foregone conclusion, and it's good to not come in with that expectation. But most median students at top schools who are capable of carrying on a conversation for at least 15 minutes are reasonably likely to get biglaw.

Even a YLS graduate who would much rather litigiate cases versus writing docs all day can easily choose biglaw to prosper and pay off their stacked up loans.

Just a heads-up: litigation is at least 50% writing docs all day. Even criminal trial lawyers--who will tend to be in the courtroom more often than any other kind of lawyer--spend a lot of time writing up documents. So if you're interested in criminal practice because you think you'll be on your feet arguing to a judge/jury all day every day, I'd suggest shadowing a real prosecutor/defender for a few days to see what the reality of practice is like.

[Wild Card]

No, the vast majority of students at top law schools come from wealthy families:

"More than three quarters of the students at the nation’s top 20 law schools come from the top one-fourth of the socioeconomic population, and well over half of the students at these schools come from the top 10 percent . . . . Just 2 percent come from the bottom quarter. . . ."

http://www.abajournal.com/news/article/ ... aw_schools

[QContinuum]

and 2) possibly defer marriage for 10 years, because getting married may significantly increase the graduate's monthly repayment amounts.

I mean, it's true that getting married increases your monthly repayment amounts because your spouse's income counts. But you also have your spouse's income, and your payment is still capped per PAYE/REPAYE. So while it's more than you'd pay if you were single, it's not going to beggar you. There is also the option under PAYE to file separately and only have your own income count (not sure in the long run if the tax implications are worth it, but it's an option).

I also don't think 10 years in public service means you can't change jobs - it depends a lot on what you actually do. Careers are long and can go in directions you don't anticipate. You're not likely to move into biglaw after 10 years in public service, but there are lots of other kinds of paths.

I did not claim that getting married would "beggar" someone on PAYE/REPAYE/PSLF. Rather, my claim - which I stand by - is that a life change such as switching out of PI or getting married (and one or both of these is hardly unlikely to happen) may result in the graduate repaying/needing to repay significantly more than initially planned/anticipated. The broader point was that PAYE/REPAYE/PSLF aren't a panacea that allows someone to simply not worry about their debt load. Rather, even with loan forgiveness and repayment assistance, ex ante debt minimization should still be a priority.

To your second point, yes, you can change from one PSLF-eligible job to another PSLF-eligible job. You can even take some time off or work in a non-PSLF-eligible job for a bit, IIRC. The requirement isn't 10 consecutive years of unbroken employment in a single PSLF-eligible job; it's for a total of 120 timely monthly payments while employed in a PSLF-eligible job. But still, that adds up to needing to spend 10 years (even if interrupted) in PSLF-eligible employment. Entirely possible, yes, but still a shackle. 10 years is a long time and a pretty large chunk of anyone's career, especially when it comes at the very beginning of one's working life.

Yes, but I think biglaw is highly competitive and the likelihood of landing a spot after law school is fluke.

No, from a T13 BigLaw is almost a sure thing and it would be more accurate to say that the likelihood of not landing a spot after law school is a fluke. Strikeouts do happen, but they are rare and typically there is some reason for it (failure to bid properly during OCI being the biggest reason - e.g., bidding only D.C. BigLaw when one has bottom-quarter grades at Cornell - followed by truly atrocious interviewing/interpersonal skills).

No, the vast majority of students at top law schools come from wealthy families:

"More than three quarters of the students at the nation’s top 20 law schools come from the top one-fourth of the socioeconomic population, and well over half of the students at these schools come from the top 10 percent . . . . Just 2 percent come from the bottom quarter. . . ."

http://www.abajournal.com/news/article/ ... aw_schools

You realize that a top-quarter household income means a household income of $111k, right? That's a very good household income, but hardly enough to allow parents approaching retirement to blithely pay >$350k for their adult child's law school costs.

[nixy]

and 2) possibly defer marriage for 10 years, because getting married may significantly increase the graduate's monthly repayment amounts.

I mean, it's true that getting married increases your monthly repayment amounts because your spouse's income counts. But you also have your spouse's income, and your payment is still capped per PAYE/REPAYE. So while it's more than you'd pay if you were single, it's not going to beggar you. There is also the option under PAYE to file separately and only have your own income count (not sure in the long run if the tax implications are worth it, but it's an option).

I also don't think 10 years in public service means you can't change jobs - it depends a lot on what you actually do. Careers are long and can go in directions you don't anticipate. You're not likely to move into biglaw after 10 years in public service, but there are lots of other kinds of paths.

I did not claim that getting married would "beggar" someone on PAYE/REPAYE/PSLF. Rather, my claim - which I stand by - is that a life change such as switching out of PI or getting married (and one or both of these is hardly unlikely to happen) may result in the graduate repaying/needing to repay significantly more than initially planned/anticipated. The broader point was that PAYE/REPAYE/PSLF aren't a panacea that allows someone to simply not worry about their debt load. Rather, even with loan forgiveness and repayment assistance, ex ante debt minimization should still be a priority.

To your second point, yes, you can change from one PSLF-eligible job to another PSLF-eligible job. You can even take some time off or work in a non-PSLF-eligible job for a bit, IIRC. The requirement isn't 10 consecutive years of unbroken employment in a single PSLF-eligible job; it's for a total of 120 timely monthly payments while employed in a PSLF-eligible job. But still, that adds up to needing to spend 10 years (even if interrupted) in PSLF-eligible employment. Entirely possible, yes, but still a shackle. 10 years is a long time and a pretty large chunk of anyone's career, especially when it comes at the very beginning of one's working life.

This boils down to personal preferences I think - I find the idea that you would put off getting married for ten years, if you otherwise wanted to get married, to avoid paying more on student loans, when the system is designed for you to be able to afford to make payments, sort of baffling and sad. Paying more than you originally intended isn’t necessarily a problem when the trade off is handling your personal life as you’d prefer.

My point about the 10 years was more that people have LOTS of time left in their careers after that, and people change careers all the time. Check in with the people on this site as to where they are career-wise 10 years from now and the majority are likely to be in something completely unanticipated.

I agree that overall minimizing debt is important and people shouldn’t treat PSLF/loan repayment as a panacea. I just think there can be a little too much scaremongering about PSLF.

[nealric]

No, the vast majority of students at top law schools come from wealthy families:

"More than three quarters of the students at the nation’s top 20 law schools come from the top one-fourth of the socioeconomic population, and well over half of the students at these schools come from the top 10 percent . . . . Just 2 percent come from the bottom quarter. . . ."

http://www.abajournal.com/news/article/ ... aw_schools

There's no doubt that most students at top law schools (and other top tier universities) come from well-off backgrounds. But, being from a top 10% family doesn't mean they can or are willing to bankroll $250,000+ in law school tuition for an adult child.

[cavalier1138]

No, the vast majority of students at top law schools come from wealthy families:

"More than three quarters of the students at the nation’s top 20 law schools come from the top one-fourth of the socioeconomic population, and well over half of the students at these schools come from the top 10 percent . . . . Just 2 percent come from the bottom quarter. . . ."

http://www.abajournal.com/news/article/ ... aw_schools

There's no doubt that most students at top law schools (and other top tier universities) come from well-off backgrounds. But, being from a top 10% family doesn't mean they can or are willing to bankroll $250,000+ in law school tuition for an adult child.

Yeah, I think people forget that a first-year associate at big firm is already in the top 4% of earners in the country. Biglaw radically skews the perception of what constitutes a good salary.